Safaricom: FY 21 results – EPS misses, but M-PESA surpasses expectations

  • Safaricom's FY 21 EPS fell by 6% due to the impact of zero-rated fees on M-PESA revenue, but H2 showed signs of recovery
  • Safaricom is helping Kenya digitise rapidly through innovation and financing
  • Safaricom is set to return to growth by FY 22, driven by data, M-PESA and fixed services, reiterate Hold
Safaricom: FY 21 results – EPS misses, but M-PESA surpasses expectations

Safaricom released its FY 21 results showing EPS fell by 6.8%, worse than our expectation of a 3% decline. Voice, data and messaging revenue came in worse than our expectation but M-PESA and Fixed services revenue surpassed expectations. Finance costs and a loss from associates and joint ventures further dragged on profit.  

Capital expenditure declined 3.2% yoy to KES34.96bn, slightly below the guidance of KES35-38bn, and capex intensity declined from 13.8% to 13.2%, but the company intends to ramp up in the coming year. Looking at the half-year like-for-like performance, it shows signs of recovery in M-PESA revenue and accelerated growth in fixed services revenue.

H2 2020 showed signs of recovery across most segments

Revenue and profit performance vs expectation

M-PESA, largest slice of the pie

M-PESA’s revenue declined by 2.1% yoy in FY 21 despite 29.8% yoy growth in transaction volume and 58.2% yoy growth in transaction value. The pulldown in revenue is heavily tilted towards H1 (-14.5%) while H2 grew by 10.1%. The suspension of charges on the bank-to-mobile wallet, mobile-to-bank wallet, and P2P transfers below KES1,000 were responsible for the strong decline seen in H1. Although charges have resumed on P2P transactions, Safaricom reduced transaction costs across the board and has kept bank-to-mobile wallet and mobile wallet-to-bank transfers free.

The free bank-to-mobile wallet and mobile wallet-to-bank transfers were largely responsible for the growth in volume and value of transactions, as customers took advantage of the arbitrage opportunity to deposit through M-PESA and transfer to their bank for free. This was responsible for 18.4% growth in commission paid to agents.

M-PESA revenue now makes up the largest share (c33%) of Safaricom’s revenue, as voice revenue continues to decline. We believe that the growth in transaction volume will offset the reduction in fees and set M-PESA revenue on a growth path once again in FY22. The growth prospect and the continued product development effort will keep M-PESA as Safaricom’s strongest revenue line.

M-PESA is the strongest revenue line of Safaricom

Data: More than enough capacity

Data revenue grew by 11.5% yoy to KES44.7bn, active customers grew by 9.9% and ARPU grew by 3.7% yoy. Average GB per chargeable user increased by 32.7% but rates declined 21.9% yoy. Despite the competitive pressure on pricing, there is still more than enough room for data revenue growth.

As it stands, Safaricom’s 4G population coverage in Kenya is c94% but uptake is still low, with 4G making up just 42% of broadband subscriptions in Kenya. According to GSMA, 4G makes up over 50% of global internet connections and in emerging markets like India and China it is as high as 56% and 80% respectively. This shows there is still more than enough room for growth in 4G uptake in Kenya.

The Lipa Mdogo Mdogo device financing plan is helping Safaricom improve 4G uptake. In the past year, active 4G devices grew by 39.8% yoy. We believe this effort will ultimately increase data usage. and propel data revenue growth. We estimate double-digit data revenue growth in FY22.

As mentioned in our earlier reserach, 5G is still only in its test phase, with an expected rollout to 150 sites across the country. As such, the impact on data revenue is expected to be muted in the meantime.  

The cannibalisation of SMS and voice will also continue. The migration of users from 2G to advanced technology also means the transfer of revenue from SMS and Voice to Data, due to the growing adoption and convenience of OTT services.

Fixed data services

From the industry report, Safaricom is now the market leader for fixed broadband subscriptions. Fixed services revenue grew by 5%, largely driven by growth in the Fibre to the home (FTTH) segment. FTTH revenue grew by 31.5% in FY 21 due to the change to working and schooling from home as a result of Covid. Safaricom plans to continue to develop capacity through increased capital expenditure in the fixed services segment. We believe that Safaricom will continue to maintain market leadership in this segment in the medium term as well.

Digital product – Innovating for various groups  

Safaricom has a series of initiatives in the works with the intention to service various customer segments effectively and increase monetisation. In January, the company launched M-PESA bill management services for businesses. This is in addition to the super app for merchants which it intends to launch in a few months. Recently, in line with its global expansion effort, Safaricom is exploring enabling M-PESA on Amazon's international ecommerce platform.

The telco is also capturing the digitally excluded population through its agent network, which it intends to use to convert non-internet users to internet users as well. Safaricom’s agent network grew by 43% yoy to c248,000. The efforts continue to strengthen Safaricom’s foothold in the Kenyan economy and expand its capacity to monetise.

Ethiopia update

Media reports that Safaricom will be allowed to provide mobile money services in Ethiopia seem to be driving Safaricom’s share price. However, management confirmed that international participants will not be allowed to participate in Ethiopia’s mobile money market for now, but the stance will be reconsidered down the line.


In summary, we expect the following factors to determine performance in the coming year:

  1. Improved 4G uptake will translate to higher data usage and increased data revenue.

  2. Growth in M-PESA transaction volumes and values, as well as the reversal of the Zero-rated fees on P2P transactions.

  3. Growth in Fixed service revenue as demand increases and Safaricom ramps up capex spending in that segment.

  4. Cost optimisation efforts to keep opex under control.

  5. The continued decline in SMS and Voice revenue as more people shift to internet-enabled devices.

We reiterate our Hold recommendation while we await the full annual report.

Related articles

Ethiopia has been held back by its telecoms monopoly, but change is coming

Safaricom first to bring 5G to East Africa

Safaricom continues to dominate- Latest statistics

Most Viewed See latest

This report is independent investment research as contemplated by COBS 12.2 of the FCA Handbook and is a research recommendation under COBS 12.4 of the FCA Handbook. Where it is not technically a res...

Full Tellimer disclaimers